Yellen testimony

We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time.

For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.

I have read some notes on Optimal Control too which appears to be the name du jour for the policy Yellen is meant to advocate. It seems a lot like nominal GDP targeting to me though and basically an extension of the belief in forward guidance over an increasingly long period of time. All this of course in the name of closing the elusive output gap. I wonder though whether this will revive the old policy irrelevance discussion; see for example this classic by heavy weights Kydland and Prescott.